Ex-Howrey Lawyers Stick Together

About 60 former Howrey attorneys are teaming up, and we’re not talking about a softball team.

No, the attorneys—former contract attorneys and non-equity partners—have joined forces to protect themselves from potential lawsuits to recover the compensation they received before the law firm’s demise and subsequent bankruptcy filing last year.

The attorneys, who once populated Howrey’s intellectual property, litigation and other practices and now work at such firms as Cooley and Greenberg Traurig, have hired the San Francisco law firm of Dumas & Clark to represent them in “protecting and advancing certain common interests and issues in lawsuits, claims, and proceedings that are or may potentially be alleged or asserted by or against members of the group,” according to a filing Friday in the U.S. Bankruptcy Court in San Francisco.

The trustee running Howrey’s liquidation, Allan Diamond, has told us that he may sue Howrey’s former partners to recover compensation paid out of the law firm’s alleged profits. The trustee can sue to recover, or claw back, the money on the grounds that the firm wasn’t profitable but was instead insolvent and unable to pay its other obligations as they came due.

Attorney Cecily Dumas told Bankruptcy Beat Monday that the lawyers she’s representing were partners in name only. As Level One partners, the Howrey lawyers didn’t hold equity in the firm and were contractually barred from sharing in the law firm’s profits, instead receiving salaries.

“I believe…that even though these individuals had the title of partner, they were not partners in the true sense and therefore are not subject to partner clawback claims,” she said. No lawsuits have yet been filed.

Dumas, who said she has represented former partners in the law firm bankruptcies of Brobeck Phleger & Harrison and Heller Ehrman, said the attorneys she’s representing weren’t necessarily part of Howrey’s “inner circle” and didn’t hold management roles.

“They shared in the downside, but they didn’t share in the upside,” she said.

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From Dow Jones Daily Bankruptcy Review, exclusive coverage of corporate bankruptcies, companies headed for trouble and the latest trends in bankruptcy law, distressed investing and corporate restructuring. Lead writer Pat Fitzgerald and Daily Bankruptcy Review reporters in Washington, New York and Wilmington, Del., provide insight into the big cases, who’s next to fall and what’s making news across the bankruptcy market.